Healthcare Reform

PCOR Fee Increased for 2018-2019 Plan Years

On Nov. 5, 2018, the IRS released Notice 2018-85, which announces that the adjusted applicable dollar amount for PCOR fees for plan and policy years ending on or after Oct. 1, 2018, and before Oct. 1, 2019, is $2.45. This is a $.06 increase from the $2.39 amount in effect for plan and policy years ending on or after Oct. 1, 2017, but before Oct. 1, 2018.

As a reminder, PCOR fees are payable by insurers and sponsors of self-insured plans (including sponsors of HRAs). The fee doesn't apply to excepted benefits such as stand-alone dental and vision plans or most health FSAs. The fee, however, is required of retiree-only plans. The fee is calculated by multiplying the applicable dollar amount for the year by the average number of lives and is reported and paid on IRS Form 720 (which hasn't yet been updated to reflect the increased fee). It's expected that the form and instructions will be updated prior to July 31, 2019, since that's the first deadline to pay the increased fee amount for plan years ending between Oct. and Dec. 2018. The PCOR fee is generally due by July 31 of the calendar year following the close of the plan year.

The PCOR fee requirement is in place until the plan years ending after Sept. 30, 2019.

Agencies Issue Final Rules to Broaden Exemption from Contraceptive Coverage

On Nov. 7, 2018, the HHS, the Treasury Department and the DOL (the Departments) jointly released advanced copies of two final regulations that broaden the exemption from the ACA's contraceptive mandate. The final rules are effective 60 days following publication in the Federal Register (expected Nov. 15, 2018).

As background, the ACA requires plans to cover certain preventive services with no cost-sharing. However, a number of religious institutions objected to being required to cover certain contraceptives, prompting the Obama administration to provide a waiver and accommodation process for those institutions. The Supreme Court's decision in
Burwell v. Hobby Lobby Stores, Inc.
ruled in favor of Hobby Lobby, holding that closely held for-profit employers could also choose not to cover certain contraceptives.

Then, in Oct. 2017, the Trump administration issued two interim final rules which broadened the exemption for sincerely held religious beliefs and sincerely held moral convictions. Further litigation spawned from the interim final rules and two federal courts issued preliminary injunctions blocking the federal government from enforcement of these rules as a result (see Jan. 11, 2018, edition of
Compliance Corner
). It remains to be seen how the courts' injunctions will impact the finalized rules.

First, the final rule on religious exemptions expands the exemption that previously applied only to churches and similar religious organizations. This particular exemption will be available to non-governmental employers and institutions of higher education, nonprofits, for-profits, insurers and individuals with religious objections where the employer plan sponsor and/or issuer (as applicable) are willing to offer a plan omitting certain contraceptive coverage. The religious exemption does not apply to governmental plans, and no publicly-traded employers are expected to invoke the religious exemption.

Second, the final rule on moral exemptions is more restrictive than the religious exemption. Under the moral exemptions rule, only nonprofits, privately held for-profit employers, insurers, institutions of higher education, and individuals can invoke an exemption to the contraceptive mandate based on sincerely held moral objections. This could encompass association health plans where the plan sponsor is a nonprofit or a privately-held for-profit entity. However, the moral final rule does not extend to governmental plans or publically traded for-profit employers.

Both rules maintain the availability of an optional accommodation where the entity's insurer or third-party administrator is responsible for providing contraceptive services to plan participants and beneficiaries on a voluntary basis. In other words, an otherwise exempt employer could decide to take advantage of the accommodation, which would provide contraceptive coverage to its employees and their dependents on an optional basis. Businesses that object to covering some, but not all, contraceptives would be exempt with respect to only those methods to which they're opposed.

Under both final rules, if an employer objects to contraceptive coverage on a religious or moral basis, the group health plan, the insurer, and the coverage itself are exempt from the full ACA guidelines on contraceptive methods. Those entities are not subject to a penalty for failure to cover contraceptives for plan enrollees. Employers who claim an exemption do not have to provide any sort of self-certification or notice to the government.

Several states currently require insurers to cover contraceptives and several others have religious exemptions of some kind, but it should not be assumed that these are comparable with the new federal exemption. The departments state that the final rules only apply to the federal contraceptive mandate and do not regulate, preempt or otherwise address various state contraceptive mandates or religious exemptions. Therefore, if a plan is exempt under the final rule on religious or moral exemptions that does not necessarily exempt the plan or insurer from applicable state laws. Of course, state mandates do not apply to self-funded plans, but they apply to fully-insured plans.

Importantly, though, ERISA requires employers to outline the plan's covered services in the plan document. As such, employers should keep in mind that the rules require employers to notify employees of any change in contraceptive coverage, in accordance with current ERISA rules. So, for example, where the decision not to cover certain contraceptives is a material modification or reduction in covered services, the employer will need to provide employees with Summaries of Material Modification. In addition, if that decision is made outside of open enrollment/renewal, the employer may also be responsible for an advance notice under the summary of benefits and coverage (SBC) rules, which may require 60-days advance notice of the change.

The final rules are effective 60 days following publication on the Federal Register (presumably effective Jan. 15, 2019). However, as these various legal challenges work their way through the courts, employers wishing to avail themselves of these exemptions should work with legal counsel to ensure that they implement the exemptions in a compliant manner, paying special attention to applicable state laws.

IRS Publishes Guidance on Substitute Forms for Employer Reporting

This week, the IRS released the 2018 version of Publication 5223, General Rules and Specifications for Affordable Care Act Substitute Forms 1095-A, 1094-B, 1095-B, 1094-C and 1095-C. As background, applicable large employers (those subject to the employer mandate) and employers that sponsor self-insured plans are subject to certain informational reporting requirements under IRC Sections 6055 and 6056. Under those sections, those employers must file Forms 1095-B and 1095-C (as applicable) with the IRS and distribute either a copy of the forms or a substitute form to employees or otherwise covered individuals.

Publication 5223 outlines standards for acceptable substitute forms that may be sent to the IRS and also outlines acceptable standards for substitute forms furnished to individuals. The standards are quite rigorous, including specific font size, ink type, paper orientation and weight, and print positions. Importantly, should the employer choose to use substitute forms, these standards must be satisfied in order to avoid employer reporting penalties (also outlined in the publication). The 2018 version of Publication 5223 contains no major changes from previous years but has been updated to reference new dates and forms.

Most employers use the standard Forms 1094/95-B/C to fulfill their reporting obligations, in which case the publication is not applicable. That said, employers that want to use substitute forms should review the publication to ensure any substitute forms they use are consistent with the standards.

Retirement Update

On Nov. 1, 2018, the IRS issued Notice 2018-83, which relates to certain cost-of-living adjustments for a wide variety of tax-related items, including retirement plan contribution maximums and other limitations for tax year 2019.

For 2019, the elective deferral limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government's Thrift Savings Plan increases to $19,000 (up from $18,500 in 2018).

Additionally, the catch-up contribution limit for employees age 50 and over who participate in any of those plans remains at $6,000. The annual limit for Savings Incentive Match Plan for Employees (SIMPLE) retirement accounts will increase from $12,500 to $13,000.

The annual limit for defined contribution plans under Section 415(c)(1)(A) increases to $56,000 (from $55,000), and the annual limit on compensation that can be taken into account for contributions and deductions increased from $275,000 to $280,000. The threshold for determining who is a "highly compensated employee" (HCE) increases to $125,000 (from $120,000).

The annual benefit for a defined benefit plan under Section 415(b)(1)(A) increased from $220,000 to $225,000, and the dollar limitation concerning the definition of key employee in a top-heavy plan and the limitation on IRA contributions increased from $175,000 to $180,000.

Cost-of-living adjustments are effective Jan. 1, 2019. Sponsors and administrators of benefits with limits that are changing will need to determine whether their plans automatically apply the latest limits or must be amended (if desired) to recognize the changes. Any changes in limits should also be communicated to employees.

FAQ

We offer a high deductible health plan with an HSA to our employees. If the deductible is embedded, how does this impact the HDHP's limits for 2019?

In order for an individual to be eligible to open and contribute to an HSA, they must be enrolled in a qualified HDHP and in no other disqualifying coverage (no "first-dollar coverage"). A qualified HDHP cannot pay any benefits before the minimum statutory deductible is met ($1,350 for self only HDHP and $2,700 for family HDHP in 2019). There is also a maximum out of pocket (OOP) limit for QHDHPs ($6,750 and $13,500 for 2019, respectively).

There is a special rule regarding embedded deductibles for individuals with family HDHP coverage. In order for the health plan to remain an HSA-qualified HDHP, the plan cannot pay benefits for an individual under the family tier of coverage until the minimum statutory family deductible has been met. This is tied to the statutory family deductible, not the plan's family deductible. So, benefits could not be paid for an individual with family HDHP coverage in 2019 before the insured has met at least $2,700 of the deductible.

For example, Pat is enrolled in self-only HDHP; his deductible is $1,500. All covered expenses are paid 100 percent after he has met his deductible.

John, Jane and Junior are enrolled as family on an HDHP. The whole family has to meet $3,000 deductible for everyone's expenses to be paid 100 percent for the rest of the year. If any one individual in the family has $2,700 in expenses, that one person has met the individual embedded deductible and has their own covered expenses paid 100 percent while the other family members continue to accumulate up to $3,000. Typically, one person in the family tends to meet their full deductible in the year. So, the scenario could be Jane has $2,700 in expenses and meets her embedded individual deductible, John has $100 and Junior has $200. Then claims would be paid 100 percent for all members going forward. Another way they could meet the family deductible would be if Jane incurs $1,000, John incurs $1,500 and Junior incurs $500. In this case, the embedded deductible was never triggered, but would still be a qualified HDHP.

Additionally, there are separate ACA rules to consider. The ACA OOP max for 2019 is $7,900 for individual coverage and $15,800 for family (for 2019). Non-grandfathered plans must have embedded individual max OOPs with family coverage. HHS guidance confirms that the ACA's self-only annual cost-sharing limit acts as an embedded limit when an HDHP provides coverage other than self-only coverage (that is, family HDHP coverage). In other words, if an individual stays in-network, then under no circumstances should that individual pay more than $7,900 (in 2019), even if it is non-embedded/aggregate.

Therefore, putting these rules together (the embedded minimum deductible under QHDHP and embedded max OOP under ACA), this could result in an individual embedded maximum OOP being less than the plan's family deductible. For example, if a carrier says that an individual must meet $10,000 in OOP (to match the family deductible), that design would be out of compliance with the ACA requirement.

So, the embedded OOP for an individual with QHDHP family coverage in 2019 must meet both of these conditions:

At least $2,700 (the statutory family deductible for QHDHPs)

Equal to or less than $7,900 (the statutory ACA individual max OOP)

As another example, four individuals (A, B, C and D) are enrolled in family coverage with an OOP max of $13,500. A incurs $10,000 in covered expenses, and B, C and D each incur $3,000 in covered expenses. Since the self-only max OOP applies to each person ($7,900 in 2019), A's cost sharing is limited to $7,900, and the plan has to pay the difference ($10,000 - $7,900). With respect to cost-sharing incurred by all four individuals, the aggregate is limited to $13,500, so the plan has to pay the difference ($7900 + $3000 + $3000 + $3000 = $16,900), which is $16,900 - $13,500 ($3,400).

State Updates

California

SDI and PFL Benefits Revised for 2019

The CA Employment Development Department (EDD) recently announced that the 2019 employee contribution rate for State Disability Insurance (SDI) will remain at 1.0 percent. The taxable wage base from which the contributions will be taken will increase from $114,967 for calendar year 2018 to $118,371 in 2019. The maximum weekly benefit increases from $1,216 to $1,252.

Limit on Prescription Costs

On Sept. 26, 2018, Gov. Brown signed AB 2863 into law. The new law, effective Jan. 1, 2019, limits the amount that a health plan participant will pay for a covered prescription at the point of sale at the pharmacy. Specifically, a participant will pay the applicable cost-sharing amount (copayment or coinsurance) or the retail price, whichever is less. A participant cannot be required to pay a cost-sharing amount that exceeds the retail price.

San Francisco HCSO Rates for 2019

The San Francisco Health Care Security Ordinance (HCSO) requires covered employers to satisfy an employer spending requirement by making health care expenditures for their covered employees, among other reporting and notice requirements. The health care expenditure rate varies depending on the size of the employer and increases incrementally each year.

As of Jan. 1, 2019, the health care expenditure rate for large employers with 100 or more employees increases to $2.93 per hour payable (up from $2.83 per hour in 2018). For medium-sized employers with 20 to 99 employees and for nonprofit employers with 50 to 99 employees, the expenditure rate will rise to $1.95 per hour payable (up from $1.89 per hour payable in 2018). Employers with fewer than 20 employees and nonprofit employers with fewer than 50 employees are exempt.

If an employee is a managerial, supervisorial or confidential employee earning $100,796 per year ($48.46 per hour) or more, that employee is exempt from the HCSO. This represents an increase from last year's threshold of $97,693 per year ($46.97/hour).

All covered employers are required to post the revised notice by Jan. 1, 2019, in all workplaces and job sites. The revised notice is not yet available. Please look for it in a future edition of
Compliance Corner
.

Coverage for Oral Anti-Cancer Medications Revised

Under current law, group health plans that provide coverage for prescribed, orally administered anti-cancer medications cannot impose a cost sharing amount greater than $200 for a 30-day supply for such medication. On Sept. 17, 2018, Gov. Brown signed AB 1860 into law, which increases the permissible cost sharing limit to $250. The law is effective Jan. 1, 2019 and will expire Jan. 1, 2024 unless further legislative action is taken.

District of Columbia

Universal Paid Leave Guidance

The D.C. Department of Employment Services (DOES) has published guidance on the Universal Paid Leave (UPL) Act in the form of two FAQs that are divided into employer and employee questions. As a reminder, the new law will provide employees with paid leave beginning July 1, 2020. The leave is administered by DOES, but is funded by employers who will contribute 0.62 percent of payroll starting July 1, 2019. Eligible employees will be entitled to up to:

Eight weeks for parental leave (new child)

Six weeks for family leave (to care for a family member with a serious health condition)

Two weeks for medical leave (employee's own serious health condition)

The employee FAQ clarifies the following issues:

Employees will be eligible for UPL if they spend 50 percent of their work time for that employer in D.C. during some or all of the previous 52 weeks. This includes those who telework/telecommute, temporary employees and seasonal employees.

UPL may be taken intermittently in one-day increments.

The employer FAQ clarifies the following issues:

Businesses of any size performing services in D.C. that also pay unemployment taxes for employees will be required to pay quarterly UPL taxes.

There is no exemption for employers who currently provide some sort of paid leave for employees. The employer may choose to coordinate benefit payments during the period where an employee is eligible for both, but an employee's UPL benefits will not be reduced or eliminated by the receipt of paid leave benefits from an employer.

DOES will be providing a notice that will need to be posted in the workplace. They have already provided a
calculator
and a
chart
to assist employees in estimating paid weekly benefits. Lastly, a
chart
comparing the provisions of federal FMLA, DC FMLA, DC UPL (also called Paid Family Leave or PFL) and Accrued Sick and Safe Leave is also available.

Massachusetts

Massachusetts Adds New HIRD Submission Requirement For Employers

On Oct. 24, 2018, MA DOL published a new FAQ document regarding the new Health Insurance Responsibility Disclosure (HIRD) reporting requirement that goes into effect for 2018. The HIRD is an online reporting requirement that employers must complete on or before Nov. 30, 2018.

Though this new 2018 HIRD form has the same name as an earlier 2006 form requirement, it doesn't relate to this prior filing. The previous HIRD form required employers to provide the number of full-time and part-time employees and whether the employer offered subsidized health insurance coverage. This HIRD requirement was suspended after it was determined to be redundant under the ACA's employer mandate. The new HIRD does not have any individualized information and does not require employees to provide any information.

Employers with at least six employees (including all categories of employees) in MA, (regardless of whether they offer health insurance) must state whether they offered to pay or arrange for the purchase of health care insurance and information about such health care insurance such as: the total employer and employee premium cost, benefits and coverage levels offered, the in-network deductible, the maximum out-of-pocket expenses, cost-sharing details, eligibility criteria, whether the plan meets the MA minimum creditable coverage requirements, and other information deemed necessary by the division. If an employer knowingly falsifies or fails to file any required HIRD information, they may be subject to a penalty of not less than $1,000 or more than $5,000 for each violation.

This new HIRD form is an online submission that collects employer-level information about employer-sponsored health plans to assist MassHealth in identifying members who can participate in and who may be eligible for premium assistance from MassHealth. To complete the form, employers visit the MassTaxConnect online portal that is being administered by MassHealth and the Department of Revenue. Under the MassHealth program, if an employee qualifies for premium assistance, MassHealth will pay the subsidy directly to the employee. Information collected through this form shall not be used to deny or terminate MassHealth eligibility for non-disabled persons who would otherwise qualify for a program of medical benefits who have access to employer sponsored health insurance.

Though the employer is ultimately responsible for ensuring the information is provided in a timely and accurate manner, the published FAQ indicates that the form may be completed by an employer or its payroll vendor. Employers that maintain multiple plan options must disclose each plan.

The form is available online now and employers must complete the online filing by Nov. 30, 2018 (and during the filing period of Nov. 1 through Nov. 30 annually thereafter).

New Jersey

New Jersey Reiterates State Law Regarding AHPs

As background, on June 21, 2018, the DOL issued final regulations regarding AHPs and expanded the definition of an "employer" for associations that could sponsor group health coverage. The regulations permit an association to form for the sole purpose of offering an AHP (or MEWA) to its members, provided the association maintains a commonality of interest. Essentially, the DOL made it easier for association-sponsored plans to offer group health coverage and be treated as a single "employer" for ERISA purposes to allow treatment similar to large-group coverage.

This bulletin points out that the DOL's final regulations explicitly state that traditional oversight and regulatory authority over AHPs/MEWAs remains with the states and does not modify or limit existing state authority under ERISA. Any state law regulating insurance may apply to the AHP, to the extent that it isn't inconsistent with ERISA. NJ law also extends to policies issued outside of NJ.

The intended purpose of the bulletin is to advise carriers, brokers and other interested parties that the recent federal rulemaking related to association health plans (AHPs) does not modify or preempt NJ's existing regulatory authority and oversight regarding MEWAs, and any AHP operating, expanding or otherwise marketed in NJ. Ultimately, a MEWA or AHP, whether insured, partially-insured or self-funded whether organized in NJ or another jurisdiction may not market (that is, sell, solicit or negotiate) its plan in NJ unless it complies with all applicable NJ laws and regulations.

New Jersey Issues FAQ for Sick and Safe Leave Law

On Oct. 29, 2018, the NJ Earned Sick Leave Law went into effect. On that same day, NJ's Dept. of Labor and Workforce Development (DOL) released an FAQ and published a model employee notice in English and 12 other languages.

As we discussed in previous
Compliance Corner
articles (the
Oct. 3 Paid Sick Leave proposal update
and the
May 1 Paid Sick Leave Law update
), Gov. Murphy signed the NJ Paid Sick Leave Act into law on April 12, 2018, making NJ the 10th state to require employers to provide paid time off to full- and part-time workers. Under the law, employers must allow eligible employees to accrue up to 40 hours of paid sick leave.

The FAQ provides answers to more than 100 questions, including details regarding the employees that are covered by the law, the rights to earn sick leave, the proper use of sick leave, how an employee's earned sick leave is paid, how an employee can file a complaint against an employer, and the required notice to employees.

The DOL also published a model employee notice to assist employers with the law's requirement to give employees notice of their right to earned sick leave. Specifically, employers are to provide notice of employee rights within 30 days of the notice being published (Nov. 29, 2018), at the time of a new employee's hiring (going forward), and upon first request by an employee. The model notice is available in English and 12 other languages: Arabic, Chinese (simplified and traditional), Guajarati, Haitian Creole, Hindi, Italian, Korean, Polish, Portuguese, Spanish and Tagalog. The employer must also provide notice of the law in a conspicuous place or places to all employees of each employer's workplaces. This poster must be displayed in English, Spanish or any other language that a majority of employees consider their primary language as long as the agency has created a notice in that language.

Employers must keep or maintain records that the notice was provided to an employee and proof that it was received. The FAQ clarifies that an employer may satisfy this requirement by sending employees an email and can satisfy the posting obligation by displaying the notice on internet or intranet sites exclusively used by employees (if all employees have access). Saved signed copies or email receipts is a good way to document that individual notice occurred.

The NJ DOL is accepting written comments to the proposed rules through Dec. 14, 2018.

The employer should review its record retention policies to ensure compliance with the law.

This letter is a result of the NY Dept. of Financial Services (DFS) becoming aware that some insurers continue to market and issue expense-incurred limited benefits health insurance policies that cover hospital, surgical or medical care. These policies are not permitted under NY law. Specifically, insurance policies that provide hospital, surgical or medical care on an expense-incurred basis must comply with the state's minimum standards and consumer protections applicable to comprehensive hospital, surgical and medical insurance coverage. This includes mandated benefits, minimum loss ratios, community rating for individual and small groups, prohibitions on annual and lifetime limits, and prohibitions on pre-existing condition limitations.

Insurers that have issued policies or contracts in-force must contact DFS and will either discontinue the policies and contracts upon renewal or amend the policies and contracts so that they meet all NY statutory and regulatory requirements.

This law does not directly impact employers but is another reminder that NY state requirements are independent of federal law.

New York Issues Reminder of State Requirements for "Single Group Health Plans"

On Nov. 1, 2018, Health Bureau Chief Johnson issued a Supplement No. 1 to Insurance Circular Letter No. 10 (2018) to remind insurers that if an association is considered a "single group health plan" under federal law, issuers must determine what type of group the association is under the NY insurance law and ensure that such coverage issued to the association complies with state law and regulations.

As background, on July 27, 2018 the Dept. of Financial Services issued Circular Letter No. 10 to remind insurers that associations are not preempted by federal law and NY strictly limits the associations or groups of employers that may sponsor a health insurance plan (see
Compliance Corner
on
Aug. 7, 2018
). Both circular letters are in response to the new AHP rule that is intended to expand the availability for AHPs to smaller employers.

This primary intent of this supplemental letter is to clarify that, because NY specifically codified the ACA's "look through" provision, there isn't an exemption recognized in the state that would allow an association to be considered a "single group health plan."

The look through provision requires that employer-based association coverage exist at the individual employer level and not at the association-of-employers level. (Large employers must be issued large group coverage; small employer members must be issued small group coverage). However, HHS acknowledged a rare instance where an association of employers may be deemed a single "employer" to provide a single group health plan. This rare instance is the basis for the recent federal expansion to the definition of "employer" for associations that could sponsor group health coverage. However, such instance cannot exist in NY and any "association coverage" in NY must be rated based on its underlying member employers and not based on the size of the association.

This material was created by PPI Benefit Solutions to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The service of an appropriate professional should be sought regarding your individual situation. PPI does not offer tax or legal advice. "PPI®" is a service mark of Professional Pensions, Inc., a subsidiary of NFP Corp. (NFP). All rights reserved.